Barry Pennypacker, who stepped down as Gardner Denver’s CEO last year, violated confidentiality agreements by working as a consultant to KKR, the New York-based private-equity firm offering $76 a share for the maker of air compressors and pumps, lawyers for shareholders who sued to oppose the bid said in a Delaware Chancery Court filing in Wilmington.

KKR “improperly obtained confidential information from Pennypacker that gave KKR the conviction to submit” its winning bid, investors’ lawyers said in the filing July 1. Lawyers for the shareholders today withdrew a request to temporarily bar the transaction.

Officials of Wayne, Pennsylvania-based Gardner Denver said last year they were reviewing options after ValueAct Holdings LP, the company’s third-largest investor, pressed directors to sell in the wake of Pennypacker’s departure. KKR’s bid came after buyout talks fizzled with SPX Corp., one of Gardner Denver’s competitors. Other private-equity firms, including Advent International Corp., Onex Corp. and TPG Capital, also walked away from takeover discussions, people familiar with the matter said.

Investors’ Allegations

Some Gardner Denver investors contend company directors and KKR officials violated legal duties to shareholders by allowing Pennypacker to serve as a consultant on the bid after leaving the company. Pennypacker isn’t named as a defendant in the lawsuit.

“KKR has complied with all of its agreements with Gardner Denver about Mr. Pennypacker’s involvement in the transaction, and plaintiff’s allegations to the contrary are completely false,” Kristi Huller, a KKR spokeswoman, said in an e-mailed statement.

Vikram Kini, a Gardner Denver spokesman, didn’t immediately return a call for comment on the filing.

Gardner Denver said today in a filing with the U.S. Securities and Exchange Commission that KKR’s Oct.10, 2012, consulting agreement with Pennypacker provided that the parties would not share any confidential information relating to a possible acquisition of the company without prior consent.

‘Evaluation Material’

“In connection with entering into its confidentiality agreement with Gardner Denver, KKR requested that Mr. Pennypacker be permitted to receive evaluation material and provide consulting advice to KKR in connection with the potential transaction, but Gardner Denver declined to do so at the time,” the company said in the filing.

Gardner Denver hired Goldman Sachs Group Inc. last year to help it find a buyer and agreed to review more bids after talks with Charlotte, North Carolina-based SPX collapsed.

Pennypacker, who testified in a deposition he left the equipment maker in July 2012 because he was “losing touch” with company directors, began working as a KKR consultant about two months later, according to court filings.

The former CEO signed confidentiality agreements barring disclosure of information about Gardner Denver’s products, plans or financial data if it would put his former employer at a “disadvantage,” according to papers filed in the shareholder lawsuit.

While Gardner Denver’s lawyers warned Pennypacker not to violate the confidentiality agreements, the company never went to court to challenge KKR’s use of the former executive as a consultant and later agreed he could serve as its bid adviser.

Gardner Denver’s SEC filing follows an agreement with plaintiffs’ lawyers to waive standstill restrictions on other participants in the sales process and make supplemental disclosures on the deal in exchange for shareholders withdrawing their request for a preliminary injunction.